31/10/2000

Net Insight: Interim report 1 January - 30 September 2000

SIGNIFICANT EVENTS DURING THE YEAR

Sales
Five new customer agreements have been signed. The agreement between RegNet/Norrsken and one of the Net Insight dealers, Fiberdata, has resulted in Gavle Net's decision to purchase Net Insight's Nimbra One as the backbone of its new city network.

An outline agreement has been signed with Millennium Communication Networks AG (MCN) regarding Nimbra switches for commercial implementations.

An agreement has been signed with Metrocom, one of the leading fiber-network operators in St Petersburg, concerning the purchase of Nimbra switches for installation in the Metrocom city network.

Business partnerships
The first step towards a global dealer network was taken in April when Net Insight and ABB AG signed a business partnership agreement regarding the sales and implementation of Net Insight network solutions to ABB AG's customers in Austria and eastern Europe. Net Insight and ABB have for some time had a similar agreement regarding the Nordic countries.

An agreement has been signed with the American company Allied Telesyn International (ATI), whereby ATI will sell Net Insight's DTM based products for city networks under ATI's own brand name. In addition, Net Insight has signed an OEM agreement with the Japanese company Allied Telesis KK - an exclusive contract for the Japanese market. At the moment the Allied sales force is taking part in an education program.

Net Insight and Tality, an electronics company in the Cadence group, have entered into a partnership making Tality an authorised design centre for Net Insight's ASIC chip, Twintin. Tality will be supplying the latest design services around DTM to other manufacturers of network equipment ('OEM partners') to enable them to integrate Twintin into their own products.

Products and launches
Using the Nimbra One switch and the newly developed video card, a broadband video conference of perfect studio quality in real-time (270 Mbps) was staged for the first time in January. The video conference was transmitted via fiber optic network between the AGM of Svenska Stadsnätsföreningen [the Swedish City Network Association] in Gothenburg and a studio in Stockholm.

The Twintin chip was launched concurrently in Sweden and the USA on 26 April this year. Twintin is a complete broadband switch on a single chip with a switching capacity of eight Gbps (sufficient capacity to be able to switch Sweden's collective telephony traffic). The chip will be the motor in the Nimbra 200 series, but it will also be sold separately to make it easier for other players to get to grips with DTM-related production.

Directed share issue and split
A directed share issue for a total of SEK 230 million was carried out in January/February 2000.

A 5:1 split of the Net Insight B-shares was carried out on 15 May. Currently, there is a total of
39 289 300 shares with a nominal value of SEK 0.04.

New board members
Lars Berg, Bo Dimert and Lage Jonasson were elected as new members of the board at the AGM on 26 April.

Organisation and Staff
In May, Carl-Johan Blomberg was engaged as Chief Financial Officer and in June, Lars Borgwing was engaged as the head of Net Insight's US operations. Anders Persson took up the position as development manager in August.

The number of employees has increased during the period from 90 to 116.

Patents
Net Insight currently has a total of 41 patents and patent applications.


EVENTS DURING THE THIRD QUARTER

City networks: Sales and installations
During the period, Net Insight has made the first delivery to Gavle Net in accordance with the general agreement with RegNet/Norrsken. A base system has now been installed and put into operation. An upgrade of the system's software is planned for December.

Norrtälje Energi and Ålcom have bought Nimbra, the Net Insight network family, as a platform for a regional network that stretches from Åland via Norrtälje to Stockholm. The network initially comprises eight nodes. This project has been carried out in partnership with Fiberdata.

Net Insight's system linking the Backup centre on Ljusterö and Sandhamn within the Stokab network was also installed in September. The system was officially inaugurated in conjunction with the re-opening of Grönskär lighthouse by County Governor Ulf Adelsson.

Video services to the media industry
TV4 has entered into an agreement with Tele2 regarding datacom services for the transfer of uncompressed real-time video via fiber-optic networks, popularly know as 'fatband'. Tele2's national 'fatband' service has unparalleled performance and is based on Net Insight DTM equipment. The agreement also covers high-speed transfers between TV4's various local stations. The equipment was installed in September and initially comprises 5 nodes.

In September, Net Insight entered into an agreement with the pan-European operator Carrier1 regarding the development and marketing of video and other real-time services for the TV and media industry. These services involve major efficiency benefits for the media industry, such as the case of TV transmissions from sports venues that no longer require expensive OB buses with satellite links - because the high resolution images can instead be transmitted via fiber-optic networks. With the help of DTM, TV and film companies will be able to utilise the network as a medium for the transfer of on-demand video.

Technical verifications and evaluations
Net Insight has successfully verified its new interface to the current dominant transmission technology, SDH. This verification was carried out at Vasa Läns Telefon OY, which is part of the Finnet Group and Finland's second largest telecom operator. This new interface means that Net Insight can now help other operators of SDH-based networks with real-time communications and the transfer of moving images and sound within broadband networks.

EWE TEL GmbH, a north-German telecom operator based in Oldenburg (Bremen), has started tests of Net Insight's DTM technology in respect of data, telephony and video. An initial evaluation has been carried out with very positive results.


MARKET PROSPECTS AND FUTURE OUTLOOK

City networks with broadband for households
Net Insight's most important segment - city networks - is showing continued growth. City networks interface with both the large core networks and smaller, local networks. An increasing number of metro networks are based on technologies such as DWDM and SDH/Sonet, which correspond well with Net Insight's interface. SDH is currently the most common technology for transmission in operator networks around the world, and with Net Insight's new SDH interface, the target market can be expanded to include really large operators. The launch of the Nimbra 200 series opens up a very interesting and growing market segment for local networks providing broadband for households.

Work on finalising Nimbra 210 and Nimbra 290, which contain the Twintin chip, has been a prioritised activity during the third quarter. The products will be completed during the fourth quarter.

Video/media applications
A very clear trend in the communications area is towards moving images in digital broadband networks. Operators that focus on domestic broadband or on business-to-business video transfers are beginning to gain ground. The collective view of operators is that video transfers will clearly be the dominant network traffic in the future. This, together with Net Insight's opportunities to provide the major operators with technology and products, and the fact that today's packet-oriented technologies cannot handle this traffic, further strengthens Net Insight's market position.

"Most analysts consider that 90 per cent of the network traffic of the future will consist of moving images. These applications have the highest quality requirements with regard to transmission. Net Insight has shown, with its DTM technology and business partnership agreements with Tele2 and Carrier1, that the company meets these high requirements. In addition, Net Insight has improved its position in the city network segment through increased customer contracts and more installations in commercial operation," says Bengt Olsson, CEO of Net Insight.


FINANCIAL POSITION

The Group

Income and costs
The company's sales income for the period amounted to SEK 5.7 million. The total costs for the period amounted to SEK 153.6 million, SEK 56.7 million of which were for the third quarter.

Investments in fixed assets
Investments in fixed assets during the period amounted to SEK 0.8 million.

Liquidity and funding
Liquid assets, in the form of cash and bank balances in the group, amounted to SEK 247.2 million at the end of the period.

Parent company
Net sales amounted to SEK 6.5 million. A loss of SEK 139.9 million was noted after financial items. Investments of SEK 0.8 million were made during the period. Liquid funds amounted to SEK 246.9 million.

Forthcoming report from Net Insight
A press release of the figures for 2000 will be issued on February 1st 2001.


The full report including tables is available to download from the enclosed link.

Interim report for the period 1 January - 30 September 2000